Goldman Sachs to cash in on Wells Fargo stock sale

JoeBel

NEW YORK (MarketWatch) -- Its not just Wells Fargo & Co.
WFC, -0.75%
that stands to benefit from making an exit from the government's Troubled Asset Relief Program. Goldman Sachs Group Inc.
GS, -1.89%
will also get a boost.

Wall Street's biggest investment bank acted as lead underwriter on Wells Fargo's $10.65 billion share issuance on Tuesday. It was unclear exactly how much Goldman's share of the fees will be, but analysts believe it will certainly have a positive influence on fourth-quarter earnings.

Goldman, which is sharing underwriting duties with Wells Fargo's Wachovia Securities unit, will get a fee equal to about 2.25% of proceeds, according to Dealogic. It was still not known the exact number of shares that were underwritten between the two investment banks.

The push to purge TARP funds has turned into big fees in the past for the nation's biggest brokerage firms. Morgan Stanley
MS, -0.97%
and J.P. Morgan Chase & Co.
JPM, -0.79%
reported strong results during the second quarter after taking on the role of lead manager in a number of bank capital-raising deals.

In May, Wells Fargo raised $8.6 billion through a stock offering designed to raise more capital at the bank. The issuance translated into about $200 million in gross fees to underwriting banks, which at the time included J.P. Morgan and Wells Fargo's Wachovia Securities unit.

Goldman Sachs posted a $3.44 billion profit during the second quarter, with at least a portion of it driven by $736 million of profit from the investment bank's underwriting department. The amount of stock underwriting hit a quarterly record.

The pickup in underwriting also comes in time to rev up the typically slow fourth quarter. Analysts are expecting the company to report $5.63 per share when it posts results next month.

A spokesman for Goldman declined to comment.

Shares of Goldman fell $2.55 to $163.55 in early afternoon trading on the New York Stock Exchange.

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